Oil prices fall as OPEC maintains output levels

Wednesday, December 23, 2009
LONDON: Oil prices fell on Tuesday as OPEC decided at a meeting against changing the cartel’s official crude output levels, in a widely-expected move.

New York’s main futures contract, light sweet crude for delivery in February, dropped 32 cents to $73.40 a barrel. Brent North Sea crude for February lost 35 cents to $72.64 in afternoon London trading. The Organisation of Petroleum Exporting Countries (OPEC) held its crude output quotas unchanged at its meeting in Angola on Tuesday, warning of lingering weakness in the world economy.

“The economic recovery has gathered pace,” the group’s president, Angolan Oil Minister Jose Botelho de Vasconcelos, said at the start of the meeting. “The market remains well supplied. Prices have moved up to more comfortable levels,” he said as he welcomed ministers to the first OPEC meeting hosted by Angola.

“However, the fragility remains in the market and we should not forget the detrimental volatility we experienced last year,” Vasconcelos added. The cartel’s most influential member, Saudi Oil Minister Ali al-Naimi said crude price levels were “perfect.”

“Everybody is happy,” he told reporters. “We’re happy with it, because the investor is happy.” Tuesday’s meeting caps a year of recovery for oil prices, which have more than doubled since the cartel set strict quota cuts in the depths of the economic crisis a year ago.

OPEC had last week slightly upgraded its forecast for world oil demand growth next year but said usage in advanced economies would contract again. The cartel said demand would grow by 0.82 million barrels per day (bpd) or 0.9 per cent to average 85.13 million bpd, up slightly from its previous forecast for an increase of 0.75 million bpd.

But growth would be driven by developing countries, with demand in industrialised or OECD (Organisation for Economic Co-operation and Development) nations continuing to contract, the cartel said. OECD oil demand was set to contract 0.28 per cent in 2010 after falling by a record 3.9 per cent in 2009.

Last year was “one of the worst years,” with global demand estimated to have contracted by 1.39 million bpd or 1.6 per cent to 84.31m bpd, OPEC said last week.